Sony Pictures Entertainment: Fallout from the Hacking

Scandal

Jessica O’Donnell, Chipo Runesu, Sam Gray, Brooke Katzmarek

Mock PortfolioCategories

O Comedy, Same Director, Same Actors O Comedy, 1 actor O Comedy with similar budget (35-60M) O Comedy with dissimilar budget

Categories Weighted and Used to CalculateO Total Expected Worldwide Box Office RevenuesO Number of TheatersO Average Revenue per Theatre

Schedule of RevenuesO Growth Assumptions

O 2015 monthly rate: -15%O 2016 monthly rate: -25%

O Growth in perpetuity

Schedule of Revenues

1 2 3 4 5 6 $-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

Box Office Revenues

Month

Schedule of Revenues

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

DVD and Electronic Release Revenue

DVD Revenue Electronic Revenue

WACC12/31/2013 WACC Inputs

Rm 8.13%Rf 1.50%Beta 1.102Re 8.81%Tax Rate 31.2%Rd 6.19%E 65.63%D 34.37%WACC 7.25%

December 31st, 2013

PV of Revenues $149,569,202

Budgeted Costs $44,000,000

Overall Profitability $105,569,202

December 16th, 2014Assumptions

O Revenue AlterationsO 30% overall decrease in box office attendanceO 5% increase in electronic viewing

O Additional CostsO PR Consultant: $1,000,000O Cyber Security Increase: $96,154O Additional Marketing: $5,000,000

O WACC AdjustmentsO 6.02%

December 16th, 2014

PV of Revenues

$103,947,016

Budgeted Costs + Additional Costs

$44,000,000 + $6,096,154

= $ 50,096,154

Overall Profitability $80,850,862

Time Value of Money Adjusted Profitability $78,200,230

December 20th, 2014Assumptions

O Revenue AlterationsO Eliminate DVD salesO 300 theaters screeningO 10% decrease in expected theater revenuesO 5% discount for electronic viewing sites

O Additional CostsO No change

O WACC AdjustmentsO 6.02% (no change)

December 20th, 2014

PV of Revenues

$50,146,082

Budgeted Costs + Additional Costs

$44,000,000 + $6,096,154

= $ 50,096,154

Overall Profitability $49,928

Time Value of Money Adjusted Profitability $ (2,600,704)

Conclusion

O Heavy losses for SPE due to terrorist threatOLoss of Revenues and Additional Costs

O Mitigated losses by increase of electronic revenuesO Early release date and increased

publicity

Questions